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Low Interest Expectations Give Brazil a Boost

Latin American markets mostly advanced, despite weakness in the U.S. as crude oil prices ended just below US$64 a barrel. Investors are also anticipating the U.S. Federal Reserve will lift interest rates tomorrow. Brazil remained positive amid economic and corporate news.

Mexico recovered from a recent bout of profit-taking while Argentina slumped, as investors contend with the country’s second-quarter earnings season.


Brazil’s benchmark Bovespa Index jumped 193.27 points, or 0.73%, while Mexico’s benchmark Bolsa Index surged 133.63 points, or 0.92%. Argentina’s Merval Index slumped 23.90 points, or 1.57%.


Brazilian issues continued to post gains today, amid both corporate and economic reports. Surging oil prices may have curtailed further gains, as Brazil is a net importer of crude.


In economic news, Brazil posted an added US$ 904 million trade surplus for the first week of August. The government expects 2005’s trade surplus to reach US$ 38 billion, up from 2004’s US$ 33.7 billion.


Separately, according to the central bank’s weekly survey of economists, expectations for further declines in inflation were recorded for the 12-straight week. Analysts are now predicting year-end inflation will reach 5.5%, versus a reading of 5.54% last week.


Topping earnings headlines, Banco Bradesco said that its second-quarter net profit jumped to 1.4 billion reais from 641 million reais a year earlier. Brazil’s largest private bank said that its gross financial revenues jumped to 3.79 billion reais from 2.57 billion reais last year, while operating profits reached 2.15 billion reais, up from 621 million reais.


Elsewhere in banking, Banco Itaú said that it obtained US$ 100 million in loans from the Inter-American Development Bank’s Inter-American Investment Corporation and commercial banks HVB and WestLB. Itaú intends to use the money to provide medium and long-term financing to small and mid-sized Brazilian firms.


Mexican issues turned higher following a recent bout of profit-taking. Domestic shares tallied gains despite declines in U.S. markets and ahead of the U.S. interest rate decision, due out tomorrow.


Fixed-line operator Telmex’s Brazilian unit Embratel announced late last Friday that it will pay 231.25 million reais for Primesys Soluções Empresariais SA, the local corporate telecoms unit of Portugal Telecom. The deal is still subject to the approval of telecommunications regulator Anatel. Telmex shares rose in response.


America Movil jumped higher on the day, after a major investment bank lifted its year-end stock forecast for the firm’s American Depositary Receipts; although, it lowered estimates for the firm’s earnings.


Argentine stocks moved lower on the day, as the country’s second-quarter earnings season occupied investors. Petrobras Energia Participaciones posted a second-quarter net profit of 264 million pesos, reversing a year-earlier loss of 77 million pesos.


The firm’s operating profit jumped to 871 million pesos from 694 million pesos a year earlier. Sales surged more that 20% to 2.5 billion pesos. The oil and gas firm said that higher crude oil prices helped to boost results.


Flat steelmaker Siderar said that its second-quarter net profit fell to 341.5 million pesos from 362.9 million pesos, as the flat steelmaker’s margins came under pressure. Still, sales reached 1.18 billion pesos, compared to 853.6 million pesos last year.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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